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Credit card processing and small business loan strategies are
closely connected in many ways. Business owners should not overlook
the substantial working capital benefits which will accrue to
their business by effectively coordinating credit card factoring
and processing. These benefits will increase measurably if a number
of common business cash advance problems can be successfully avoided.
Even thriving small businesses frequently need more working capital
than they can borrow from a bank. One of the most important commercial
financing needs for any business is ensuring that short-term cash
requirements are successfully met. This is frequently a difficult
task.
The use of a viable business cash advance strategy has become
an increasingly important business finance tool for many businesses
faced with a potential short-term cash shortfall. However, as
noted below there are a number of potential problems to be anticipated
and avoided when businesses use credit card processing to seek
working capital advances.
Most merchants have documented credit card processing activity
and sales volume. This documentation of processing activity and
sales volume is a financial asset, since up to $300,000 and more
can typically be obtained via a business cash advance based on
future sales volume.
Before employing this strategy for working capital business cash
advances, businesses should realize that there are several recurring
potential problems that they need to anticipate. Ten common credit
card receivables problems that business owners should avoid when
employing this strategy are highlighted below.
First, many lenders will attempt to charge closing costs. Business
owners should realize that this is an unnecessary transaction
cost for business cash advances when dealing with a truly reputable
provider of working capital financing based on credit card factoring.
Second, many lenders for these services also charge up-front
fees. This is also a transaction cost that can and should be avoided,
and with the best programs there will not be any up-front fees.
Third, a number of business cash advance programs require collateral.
This is an unnecessary requirement to be avoided by business owners
seeking credit card financing.
Fourth, some lenders will require financial statements and tax
returns for all business cash advances. Such additional documentation
requirements should only be necessary for larger working capital
advances.
Fifth, monthly fixed payments to repay merchant cash advances
are imposed by some providers. The preferred approach is to avoid
such fixed payment requirements.
Sixth, some providers impose a fixed term for repayment. This
requirement to pay off the business cash advance over a fixed
term should be avoided.
Seventh, many programs for working capital business cash advances
require that a business have at least two years of operating history
to qualify. While many business owners can meet such a requirement,
a more practical standard for newer businesses is a minimum of
one year in business.
Eighth, most business cash advance providers require credit scores
of at least 680. In today's difficult economic climate, this can
be a challenging requirement. It is feasible to obtain this kind
of working capital financing with scores around 500.
Ninth, for merchants needing larger business cash advances, it
will be disappointing to learn that many programs are limited
to a maximum of $25,000 to $50,000. Providers that are better
capitalized for this business finance strategy will be able to
accommodate an advance of $300,000 and higher.
Tenth, many providers will require 12 to 24 months of documented
credit card sales of $12,000 to $25,000 or more. A more practical
possibility for business owners will involve a transaction history
with six months of $5,000 or more.
It is not likely that all ten of the obstacles described above
will be pertinent for all business owners. Business borrowers
are likely to experience several of these problems if they are
considering a business cash advance that uses credit card factoring
and credit card processing.
Can all ten credit card finance obstacles discussed above be
avoided? There are indeed viable credit card receivables programs
which avoid all of the problems described. For any business owner
considering this approach to working capital financing, it is
probably worth repeating that it is not necessary to accept any
of these problems in order to obtain business cash advances based
on future sales.
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Learn how to avoid mistakes with commercial loans and find out
about business cash management strategies - Steve Bush is a small
business loans expert =>
AEX Commercial Financing Group [ http://aexcommercialfinancing.com
]
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